More than Money: Passing on Values Through Intentional Wealth Transfer
"Shirtsleeves to shirtsleeves in three generations” is a well-known Scottish proverb that depicts a sobering reality for many families. Illustrating a scenario, we see time and time again as wealth management experts, where from humble beginnings, a family rises and accumulates wealth through hard work and financial discipline. Over time, as wealth is passed down, subsequent generations fail to grasp the management and values needed for its preservation. This cycle leads to the depletion of assets and requires the fourth generation to begin rebuilding their own wealth without the resources afforded to the previous generations.
Extensive research has shown that this proverb holds true across different countries and cultures. Although overcoming this fate is challenging, it is not impossible. Those who aim to defy the odds must recognize that generational wealth transfer is about more than just money.
In fact, alignment within the family must reach further than money and legal structures. While estate planning to ensure all the appropriate documents are in place and functional is key to ensuring a seamless generational wealth transfer, it is equally, if not more important, to transition family values, beliefs, life lessons, and emotional inheritance.
One of the most important measures you can take to ensure a successful wealth transfer to the next generation is bridging the gap of financial understanding, as well as cultivating a deep respect for how the wealth was built. At the base level, families must educate their members on budgeting, investing, wealth preservation, and the specifics of the family wealth. This ensures that each family member possesses a foundational understanding of how assets will be managed and distributed.
While it is understood that intentional generational wealth transfers are on-going and not simply a one-time event when wealth changes hands, this discussion is vital to ensuring alignment among family members while minimizing surprises. It serves as a platform for communicating the family’s vision and mission while also ensuring that each family member understands their role in carrying out the family’s legacy.
Additionally, each generation must have an intimate understanding of the origins of the family’s wealth to foster a more sincere appreciation. These feelings of pride and ownership increase the drive to sustain the family legacy. Keeping the family’s history alive through the stories of how they came to be can foster gratitude, humility, and work ethic. The more these stories effectively convey the sacrifices made to create the wealth, the better the chances are that each member of the family, no matter their generation, will be inspired to live lives of contribution and service that fuel prosperity far beyond dollar amounts.
Beyond family conversations, experimental learning through immersive internships, mentoring programs, philanthropy projects, or hands-on business exposure can be highly valuable in both financial education & value transfers. Learning through immersion often helps instill a sense of responsibility, create an understanding of the value of money, and highlight the importance of making a positive impact on society. Not to mention, these experimental learning opportunities often lead to family members of different generations working together which can help strengthen relationships and communication within the family unit.
The passing down of family traditions and celebrating family milestones creates lasting memories and can serve as a catalyst in strengthening the familial bond. It also teaches valuable lessons regarding the significance of supporting one another, the importance of sharing in the celebration of one’s achievements, the value of self-care, and the reward of hard work. Moreover, these traditions can facilitate the transition of cultural or religious values, as well as foster a sense of community and belonging.
Intentional wealth transfer demands time, commitment, and patience. It entails continuous learning, evolution, and adaptation to shifting family and societal dynamics. By practicing intentional wealth transfer through the transmission of emotional inheritance, families increase their likelihood of breaking free from the otherwise inevitable wealth cycle. Further, it increases the odds that both family wealth and members not only preserve the family legacy but also actively engage in productive endeavors, contribute positively to society, and ultimately serve a higher purpose.
As wealth management professionals, we understand the critical role that family values play in shaping intergenerational wealth transfers. We help ensure these values are effectively communicated by facilitating open and structured family discussions. Through tailored communication, delivery, and partnership, we empower family members with the knowledge and skills needed to manage wealth responsibly. This collaborative approach promotes financial responsibility. By aligning investment strategies and estate planning with core principles, we help preserve and pass on the family's values for future generations, fostering a legacy that transcends financial assets and lasts for generations to come.
Whitney Hufnagel
VP, Relationship Manager at Stride Wealth Management
*Trust and Investment Management Services are not a deposit, not FDIC insured, nor insured by any federal government agency, not guaranteed by the bank or its affiliates, and may lose value. This general market commentary is intended for informational purposes only and should not be considered investment, financial, or legal advice.